India’s manufacturing sector expanded at its fastest pace in three months in May, driven by strong domestic demand, increased infrastructure activity and a steady rise in new business orders, according to the latest HSBC India Manufacturing Purchasing Managers’ Index (PMI) survey compiled by S&P Global. The PMI rose to 55.0 in May from 54.7 in April, signalling a stronger improvement in business conditions across the sector. A PMI reading above 50 indicates expansion.
The survey showed that manufacturers recorded faster growth in output and new orders during the month, supported largely by robust demand from the domestic market. Companies reported healthy sales across several industries, particularly in intermediate and capital goods segments, aided by ongoing infrastructure projects and new business opportunities.
Production levels increased at the quickest pace since February, encouraging firms to raise purchasing activity and build inventories. Businesses also increased stockpiling of raw materials and intermediate goods as a precaution against potential supply disruptions linked to geopolitical tensions in the Middle East. Pre-production inventories rose to a three-month high, while finished goods inventories climbed significantly.
Despite the strong growth, manufacturers faced rising input costs. Survey participants reported sharp increases in expenses related to energy, fuel, transportation and raw materials. Cost pressures were among the strongest seen in nearly four years, largely due to higher commodity prices and global supply concerns. However, many firms chose to absorb part of these costs rather than fully pass them on to customers, helping to keep output price inflation relatively moderate.
The report also noted that employment continued to grow, although at a slower pace compared with previous months. Meanwhile, business confidence remained positive but eased to its lowest level since February as companies expressed caution over global uncertainties and rising costs.
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